[UPDATED] PSA: Most Stablecoins Can Be Frozen, Even in Your Own Wallets

[mk4]

It shouldn't be surprising and since it's their toy, being at their mercy should be expected.

The problem is at whose mercy you are. Circle's track record is not one of competence and none of these operations are accountable or approachable. They're also terrified of triggering their legacy masters and you're the one stuck in the middle who'll pay the price for that. You have the odds doubly or triply stacked against you.

At least with a normal bank you have a place to cover in cow shit in protest and identifiable people to blow up. With stuff like this you're nothing but an ignored email.

Shouldn't really be surprising indeed, but a lot of people shrugged this off because they haven't heard of such occurrence in the past. Well, here you go. I really wouldn't be surprised if at one point the wallet-locking occurrences will be no different with how much PayPal accounts are being locked.

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[gentlemand]

Until someone did something that attract government attention and Tether will be pressured to do similar action.

I seem to recall Tether cancelling hacked balances but other than that it would be interesting to see how they handled such a thing.

The main difference between Tether and everything else is them effectively giving up the dollar redemption. You have to find a third party mug to do it.

All they're doing in the main is operating a standard ERC20 token. Not having to deal with banking for regular dweebs, other than their own druggy banking to initially fund it and the tiny inner circle who they presumably do allow to cash out, is going to massively reduce their twitchiness.

I'll guess the standard stablecoins regard themselves as extensions of the dollar with all the terror that entails. Tether are probably the opposite.

[big_daddy]

and more USDT will be frozen https://cryptobriefing.com/tether-can-freeze-your-usdt-39-addresses-containing-millions-blacklisted/
just wait for it

[malevolent]

As ever these things are nothing more than Paypal with extra paranoia and desperation to yield to The Man. There'll be plenty more of this in future.

At least with PayPal you have reliable support, you are quite sure your $1 will still be worth $1 tomorrow and can solve any issue way faster. Have problems with a cryptocurrency? Good luck getting out of your own sh*t fast enough without having to be considered some sort of criminal by the authorities.

Only few days ago did I say over here that stablecoins may be good short-term "safezones" for Bitcoin parabolic changes. I'm now taking back my own words. Better have a 30% overnight paper loss than have 100% of your balance frozen and blacklisted.

PayPal and similar services masquerading as banks are not exactly a paragon of reliability. PayPal especially is infamous for freezing funds for 6 months for spurious reasons.

[figmentofmyass]

Giving this a bump.

https://www.theblockcrypto.com/linked/70850/centre-appears-to-have-blacklisted-an-address-holding-usdc-for-the-first-time

100,000 USD (C) frozen.

I wonder what the story is behind this.

if you think about it, holding USDC is really no different than holding USD at coinbase. they are both just centrally issued IOUs from an exchange. freezing and confiscation were always a possibility, especially when you consider potential requests from law enforcement. i was always curious about the exact method of confiscation. i guess now we know.

Ironically this is likely to fortify Tether's position.

i was surprised to find out recently that tether has actually blacklisted significantly more. there are dozens of blacklisted (frozen) addresses totalling ~8 million USDT. https://twitter.com/PhABCD/status/1281054838172848128

[gentlemand]

i was surprised to find out recently that tether has actually blacklisted significantly more. there are dozens of blacklisted (frozen) addresses totalling ~8 million USDT. https://twitter.com/PhABCD/status/1281054838172848128

I presume most of that is straightforward theft more than anything, as quite possibly the USDC one is too. Some are theorising in that Twitter thread about there being something wrong with the addresses themselves but I know zilch about ETH and wouldn't think that was possible. Nowt would surprise me though.

[o_e_l_e_o]

and more USDT will be frozen https://cryptobriefing.com/tether-can-freeze-your-usdt-39-addresses-containing-millions-blacklisted/
just wait for it

Looks like another address containing another $1.5 million USDT was just banned yesterday. You can keep track using this dashboard: https://explore.duneanalytics.com/public/dashboards/3zhIaRUCFgmZMKqHG0pguvSvw1aOGL8gxFtZ2ujf

Call me cynical/crazy, but maybe this is how Tether get out of the fact that they have printed millions of USDT out of thin air which aren't backed up by USD, or indeed, by any asset whatsoever. Permanently blacklisting an address like this effectively burns the coins and removes them circulation. Nice easy way for them to renege on some of their commitments.

[gentlemand]

My guess for those moves are theft, technical reasons and general housekeeping.

Since they have an official burning process there's no need to blacklist anything to 'remove' them. That also increases paranoia about their activities, which they probably don't care about, but I doubt anyone would want to foster it.

[o_e_l_e_o]

I think we'd hear about that very quickly and very loudly if they ever attempted that.

But 40 addresses containing a combined almost $10 million USDT have been blacklisted going as far back as 2017, and this is the first we're hearing about it. Given the Tether is a complete scam from top to bottom, I wouldn't put something like this past them.

Centralized exchanges freeze accounts and seize coins all the time with very little blowback from the community. No reason Tether can't do the same. I also wouldn't be in the least bit surprised if Tether started demanding KYC and proof of address ownership from various people in return for having their addresses un-blacklisted.

[pakhitheboss]

i was surprised to find out recently that tether has actually blacklisted significantly more. there are dozens of blacklisted (frozen) addresses totalling ~8 million USDT. https://twitter.com/PhABCD/status/1281054838172848128

I presume most of that is straightforward theft more than anything, as quite possibly the USDC one is too. Some are theorising in that Twitter thread about there being something wrong with the addresses themselves but I know zilch about ETH and wouldn't think that was possible. Nowt would surprise me though.

Whatever is the reason it is still possible for them to freeze your coin. You cannot justify such activity with a legal angle. I always felt the whole concept of a stable coin is a scam. Tether has been printing it for a long time just like fiat. 

[pooya87]

Centralized exchanges freeze accounts and seize coins all the time with very little blowback from the community. No reason Tether can't do the same. I also wouldn't be in the least bit surprised if Tether started demanding KYC and proof of address ownership from various people in return for having their addresses un-blacklisted.

they know very well what happened to each exchange that suddenly did this while others weren't, how their users mass-migrated to the competition and they dropped from being far head #1 down to #10, #20,... and kept going down.
so i don't think we can expect such behavior anytime soon unless there were serious governmental pressure.

[mk4]

I also wouldn't be in the least bit surprised if Tether started demanding KYC and proof of address ownership from various people in return for having their addresses un-blacklisted.

It isn't that far from being impossible knowing that they can. It just scares me how a lot of people think this is not possible just because it's a "cryptocurrency" and that they're holding the funds in their own non-custodial wallet.

[figmentofmyass]

Call me cynical/crazy, but maybe this is how Tether get out of the fact that they have printed millions of USDT out of thin air which aren't backed up by USD, or indeed, by any asset whatsoever. Permanently blacklisting an address like this effectively burns the coins and removes them circulation. Nice easy way for them to renege on some of their commitments.

that seems doubtful to me. there is less than $10 million USDT frozen---bitfinex makes as much in trading fees in a matter of weeks. considering $9.2 billion of tether has been issued in total, this amount of money is a rounding error, so i really doubt tether could be bothered with a scheme like that. as with the USDC freeze, these frozen funds are likely related to law enforcement requests---theft, OFAC sanctions, things like that.

[o_e_l_e_o]

considering $9.2 billion of tether has been issued in total

Wait, what? I don't pay much attention to altcoins, especially not scam ones like Tether, but wow. Last I knew they had pumped up to $6 billion, but looking at the charts they printed another $2.5 billion in a single go back in May. That's crazy. I assume they provided proof of funds which was co-signed by an independent third party auditor, right? Nobody in their right mind would just let them inflate their marketcap by $2.5 billion out of thin air, especially when they still have an outstanding loan to themselves of $500 million, right? I'm sure Tether holders everywhere were up in arms about this.

as with the USDC freeze, these frozen funds are likely related to law enforcement requests---theft, OFAC sanctions, things like that.

I'm sure they are, but I'm also sure we will never know because Bitfinex will provide zero explanation of why they are remotely freezing users' addresses. Given that, there is nothing stopping them from freezing several more million USDT and providing no explanation.

USDT is a coin which can be remotely frozen or seized, is constantly being devalued by endless printing, and is only partially backed up by USD which in itself is also constantly being devalued by endless printing. I would be surprised that people are still using it, but then again, that's still not as bad as some altcoins.

[gentlemand]

USDT is a coin which can be remotely frozen or seized, is constantly being devalued by endless printing, and is only partially backed up by USD which in itself is also constantly being devalued by endless printing. I would be surprised that people are still using it, but then again, that's still not as bad as some altcoins.

You can still get a dollar or a dollar's value for it. That's what it's for and that's all that people care about.

I'm really amazed it's continued to grow but it's just another illustration of the willingness of people in this space to make the same old mistakes, and some sexy new ones.

[figmentofmyass]

Nobody in their right mind would just let them inflate their marketcap by $2.5 billion out of thin air, especially when they still have an outstanding loan to themselves of $500 million, right?

the chinese seem to have a strong liking for tether, whether or not they are fully backed.

tether teaches us time and time again that market fundamentals don't matter all that much to price. it really doesn't matter if USDT aren't backed 1:1. what matters is that tether will redeem at 1:1 for large brokers and arbitrageurs (keeping the market pegged) and that there is massive USDT liquidity in the market, much bigger than other stablecoins.

[pooya87]

You can still get a dollar or a dollar's value for it. That's what it's for and that's all that people care about.

I'm really amazed it's continued to grow but it's just another illustration of the willingness of people in this space to make the same old mistakes, and some sexy new ones.

i'm not amazed really since it is expected. tether grew because it is filling a gap and will continue to grow as long as that gap exists.
this gap is two things. first is the need that altcoin traders have for something that has a "stable" value so that they can escape to whenever bitcoin rises or drops and causes the mass dump of altcoins. and second is another need that altcoin traders have for an easy, cheap, no KYC way of transferring value between exchanges.
if you compare the times when tether growth peaked with the altcoin market pump and dump periods you can see that the major rises were:
1. 2017 mass altcoin pump when every single altcoin even the long dead ones worth less than 1 satoshi got pumped
2. 2017 ICO mania where thousands of ICO were being created every month or so
3. 2018-2019 mass altcoin dump which was the reverse of #1
4. 2018 mass ICO death which was reverse of #2
interestingly enough tether was added to ethereum network to exactly be used for pump and dumping ICO tokens during the ICO mania by the end of 2017 and grow a lot during the ICO death spiral next 2 years.

this is also why i always found it very weird when people kept linking tether with bitcoin price when almost all of tether's volume (near 98%) and its main purpose is for altcoin trading.

[CucakRowo]

-snip-

One thing that became a question in my mind. Why tether is still used in several large exchanges. Even most exchanges that trade perpetual still use tether as a reference. With all the weaknesses that tether has, why do the exchanges still use it? Mind t share the reason? Tbh, I'm still looking for the reason.

[figmentofmyass]

-snip-

One thing that became a question in my mind. Why tether is still used in several large exchanges. Even most exchanges that trade perpetual still use tether as a reference. With all the weaknesses that tether has, why do the exchanges still use it? Mind t share the reason? Tbh, I'm still looking for the reason.

1. fast settlement time. normal fiat exchanges can take days or even weeks to credit or fulfill fiat transfers. USDT can be deposited and withdrawn in a matter of minutes.

2. chinese traders need fiat hedging instruments because the government banned CNY/crypto trading. USDT being the most lax (AML wise) and liquid of all stablecoins, it was the obvious market choice.

3. no KYC requirements on secondary markets. so exchanges like binance, poloniex, kucoin, and chinese exchanges can allow BTC/fiat hedging without verification.

4. the first 3 points reinforce strong demand for USDT markets from traders, making for thick order books. this further draws in more traders who naturally seek out markets with high volume and liquidity.

[CucakRowo]

3. no KYC requirements on secondary markets. so exchanges like binance, poloniex, kucoin, and chinese exchanges can allow BTC/fiat hedging without verification.

Thanks for your reply. This the answer i needed & make more sense imo.